How much deposit should you charge customers?

The businesses with the healthiest cash flow often aren’t the most profitable. They’re the ones whose customers pay before the costs land. A well-sized deposit, and a sensible schedule of stage payments after it, can do more for your bank balance than a year of chasing invoices.

Why take a deposit at all?

A deposit does three jobs at once:

• Funds your upfront costs. Materials, special-order stock, subcontractors and deposits you pay to your own suppliers.
• Confirms commitment. A customer who pays a deposit is far less likely to cancel, delay or shop your quote around.
• Shrinks your risk. If something goes wrong, you’re not carrying the entire job on your own balance sheet.

Without one, you are effectively lending the customer your working capital — for free — until the job is done and the final invoice is paid.

Deposits also make your cash flow easier to forecast. When every job brings in money at the start and at defined stages, your 13-week cash flow forecast becomes far more reliable, because fewer receipts depend on a single final invoice being paid on time.

How much deposit should you charge?

Work from your costs, not from what competitors seem to do.

1. List every cost you’ll pay before the next customer payment is due.
2. Add a margin for the unexpected.
3. Set the deposit to cover that total, rounded to a clean percentage.

Business type	Upfront costs that drive the deposit	Typical structure (illustrative)
Custom joinery	Timber, hardware, board orders	Deposit on order, balance before installation
Event and wedding services	Venue holds, hire gear, staff	Deposit to book, balance before the event
Web and creative agencies	Team time in the first weeks	Deposit on sign-off, then monthly or milestone invoices
Fit-out contractors	Materials, subcontractors	Deposit, then progress claims, then final with any retention
Custom manufacturing	Raw materials, tooling	Deposit, balance before dispatch

Those structures are illustrative. For residential building work, check your state’s rules first: several states and territories cap deposits on domestic building contracts and regulate progress payments.

How does progress or milestone billing work?

For longer jobs, don’t wait until the end to be paid. Break the job into stages and invoice at each one:

• Milestone billing — you invoice when a defined stage is reached (“design approved”, “rough-in complete”, “handover”).
• Progress billing — you invoice for work completed each period, often monthly.

The key is making milestones objective. “When the customer is happy” isn’t a milestone. “Once the frame passes inspection” is.

Illustrative example. A 12-week, $96,000 commercial fit-out billed only on completion means the contractor funds up to three months of wages and materials. With a 20% deposit and three stage payments, the most the contractor is ever carrying at once drops dramatically — and the job pays for itself as it goes.

If a job you’ve won needs more working capital than you have, even with good billing, ask us what’s possible. There’s no credit check to enquire.

How should deposit terms be written?

Put them in the quote so they’re accepted before work starts:

• the deposit amount (as dollars, not just a percentage);
• when it’s due and that work starts once it clears;
• what each later stage is and how much it costs;
• whether and when the deposit is refundable;
• how to pay.

Then follow your own rule. Starting “just this once” before the deposit clears teaches customers the terms are optional. For more on wording, see payment terms and our guide to quoting a job.

What if customers push back?

Most don’t. The ones who do usually respond to a plain explanation: “We order your materials as soon as the deposit clears, which is what locks in your start date.” If a customer still refuses any deposit on a custom job, that tells you something about the risk.

For large corporate customers with fixed payment processes, you may not win a deposit — but you can often negotiate a mobilisation payment or monthly progress claims instead.

What do you say when a customer questions the deposit?

A calm, specific explanation almost always works. A few lines you can adapt:

• For custom work: “The deposit covers the materials we order specifically for your job, which is what lets us lock in your start date.”
• For events and bookings: “The deposit secures your date. Once it’s paid, we turn away other bookings for that day.”
• For long projects: “We bill in stages so you only ever pay for work that’s been done, and we can keep a full crew on your job.”
• For a hesitant new customer: “It’s standard for work like this, and it’s set out in the quote so there are no surprises later.”

Avoid apologising or offering to waive the deposit on the spot. If a customer genuinely can’t pay a deposit on a custom job, consider whether the job carries more risk than it’s worth — and whether clear payment terms and a smaller first stage could work instead.

Funding the jobs that still outrun your deposit

Deposits and staged billing close most of the gap. The largest jobs — or several arriving at once — can still stretch your working capital beyond comfortable. That’s a good problem to have, and it’s one we help with.

Our team considers trading businesses for cash-flow and line-of-credit facilities typically from $5,000 to $500,000, and property-secured loans from $20,000 to $5,000,000. Your enquiry isn’t a credit check, it isn’t sold on to other lenders, and a real person looks at it and calls you. Fill in the form with accurate figures — the size of the job, your turnover, what you need — and we can match you properly first time.

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